Satellos Bioscience Inc. (MSLE) Q2 2026 Earnings Call Transcript

Greetings, and welcome to the Citello Trailhead six-month data conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Dan Ferry, Investor Relations. Thank you. You may begin.

Thank you, operator. Before we begin, I'd like to remind you that today's webcast contains forward-looking statements. Such statements may include risks and uncertainties that could cause actual results to differ materially from those expressed and or implied by these statements. For more information on such risks and uncertainties, please refer to the Risk Factors section of our Annual Information Form, dated March 2-7, 2026, which is located on our profile at www.siddharplus.ca and in our public filings on Siddharplus and EDGAR. Any forward-looking statements represent our views as of today, July 8, 2026. We also note that today's results are interim, six-month results for four patients, excuse me, four participants and the trial is ongoing. And now I'd like to turn the call over to Frank Gleason, CEO of Sotelos. Please go ahead, Frank.

Thank you, Dan, and welcome everyone to our call this morning. We're so excited to report the interim six-month results in Trailhead, and we know many on today's call have been anticipating this update, and we so appreciate your interest in Sotelos. Before I turn the mic over to my colleague Dr. Wilden Farwell to walk through the results, I'd like to point out that we see today's results as reaffirming our belief in the strategy that we developed for 3247 to first demonstrate its potential for biological activity as well as its potential for benefit in the most underserved but in need population, the adult population of patients living with DMD, and then moving to a pediatric population for our placebo-controlled study. This approach is allowing us to get an early, ongoing, and building glimpse into our drug to meaningfully de-risk our program, to generate relevant data, which is allowing us more touch points with the regulators and, of course, to provide hope for a greater spectrum of age groups of individuals living with Duchenne. We look forward to your questions this morning, and I will now ask our CMO, Dr. Farwell, to take it from here. Wilden, over to you.

Thanks, Frank, and good morning, everyone. As Frank mentioned, we are very encouraged by the six-month data from Trailhead, which as you will see, demonstrates stability or improvement across several important efficacy outcome measures with a clean safety profile consistent with previously reported data. These four participants are adults with Duchenne between the ages of 21 and 28 years of age, who completed the 28-day CL101 study and subsequently enrolled in Trailhead. Adult DMD patients are among the most challenging patient population in which to evaluate treatment effects because the disease progression inevitably leads to muscle loss, fat infiltration, and reduced muscle stem cell reserves as compared to kids with DMD, who we are currently evaluating in a separate study known as BASECAM. In Trailhead, participants were orally administered 60 milligrams of SAT-3247 five days on and two days off. The primary endpoints are safety and tolerability, as well as bicep brachy fat fraction by MRI. Other endpoints include strength, function, spirometry, patient-reported quality of life, and biomarkers, among other measures. While this is an ongoing 12-month study, the data I am presenting today represents outcomes through day 140 in Trailhead, or month 6 overall, for the four participants initially treated in CL 101. We anticipate reporting 12-month data in the fourth quarter later this year. Now turning to slide 4. We summarize a few key highlights, which we will cover in more detail momentarily. As a reminder, SAT-3247 is an investigational agent and is not yet approved in any country or region. We believe data from Trailhead continued to show a favorable safety profile and after approximately six months of overall exposure, now demonstrate a decline in fat fraction as well as an improvement in upper limb total effort among all four participants, all while maintaining strengths. Turning now to slide five, which summarizes our safety and tolerability findings. As of May 18, 2026, all reported adverse events in Trailhead have been mild or moderate in severity, and we have observed zero serious treatment emergent serious adverse events, zero adverse events leading to withdraw or discontinuation, and 100% treatment compliance. Participants have now achieved over 186 days of mean drug exposure across CL-101 and Trailhead. These safety and tolerability findings are consistent with previously reported data and we believe continue to strongly support the clinical development of SAT-3247 in DMD and other indications with serious muscle disease. Turning now to slide six. And one of the new exciting findings we are most encouraged by, change in muscle fat fraction as measured by MRI, which I will remind you is our primary efficacy endpoint in Trailhead. What you see on this slide is that all four participants showed a decline or improvement in fat fraction of the biceps brachii muscle from Trailhead baseline to day 140 in Trailhead, with a mean improvement of 3.7 percentage points, from 49.7 at baseline to 46% at day 140. Importantly, declines or improvements were observed across all four participants, with a range of 0.9 to 6.2% over the five months of dosing in Trailhead. To put that into context, published natural history data show that muscle fat fraction in adults with DMD typically increase or worsen by about 5.9 percent per year in the absence of treatment. So, rather than the disease-driven worsening in fat fraction, which we would expect to see in this population, we observed an improvement across all four participants. We believe this is a meaningful and encouraging objective signal of biologic activity for SAT-3247 in this difficult-to-treat adult DMD population. Turning now to slide seven, we looked at the real-world measure of upper limb activity called TE99C, or total effort at the 99th percentile. TE99C, also referred to as maximum effort, is a continuous measure captured using the CISNAF side device, a medical-grade wearable device widely used in clinical trials. Participants wear the device on their wrists and ankles to track movements while living their normal lives at home outside of the clinical trial setting. What you see here is that all four participants showed an increase in TE99C from CL101 baseline to trailhead month six, with a mean improvement of approximately 5.5 joules per kilogram from From 16.1 joules per kilogram at baseline in CL101 to 21.6 joules per kilogram at month six, or a percent mean improvement of approximately 34%. As with the fat fraction data on the prior slide, we think what's notable here isn't just the magnitude of the change, it's also that all four participants have improved. Because this is a continuous, real-world measure of how people actually use their upper limbs day-to-day rather than a single point-in-time clinical assessment. We view this as another encouraging signal that complements and reinforces what we're seeing in the imaging data and adds further evidence of biologic activity for SAT 3247. Turning now to slide eight, muscle strength. Across all measures of dynamometry, including hand grip strength and strength measured across the elbow and shoulder. Participants demonstrated stability across the follow-up through month six of Trailhead. Notably, the near doubling of hand grip strength first reported in the earlier 28-day CL-101 study was maintained through month six of Trailhead, even though participants had been off SAT-3247 for roughly 7 to 11 months between the end of CL-101 and initiating Trailhead. Remember that in the natural history of adults with DMD, upper extremity strength is expected to decline over time. So seeing stability across multiple assessments of strength and durability of that earlier hand grip improvement despite a treatment gap reinforces the encouraging consistent picture of benefit that we are seeing across imaging, effort, and now strength. Turning now to slide 9, creatinine kinase, or CK, which is a well-established biomarker of muscle damage. Previously, we reported in CL101 that we did not observe a consistent change in CK. What you now see is that among the four participants of Trailhead, mean CK levels appear to drop and remain lower through 140 days of dosing in Trailhead, representing a decline of 38 percent from their CL101 baseline of 2,130 units per liter to 1,315 units per liter at month six of Trailhead. Previously, we have shown an improvement in several potential biomarkers of DMD using a proteomic analysis comparing levels at baseline in day 15 and CL101. Now, we are demonstrating a decline in CK across 12 to 16 months further demonstrating a potentially important biologic signal of SAT 3247 in adults living with DMD. Turning now to slide 10, performance of the upper limb or pull is a standardized clinical outcome assessment of the upper limb function. From trailhead baseline through day 140, two participants improved by one point on the pull. The other two remained stable. So across the board, we saw either improvement or stability, with no participant declining in their overall score. In the natural history of DMD, upper limb function, as measured by pull, is generally expected to decline over time, not to remain stable or improve. With six months of total dosing, we are observing adults treated with SAT 3247 remaining stable or improving in function, while adults with DMD would often worsen. This adds another encouraging data point to the consistent pattern across biomarkers, imaging, effort, strength, and now function. Turning now to slide 11. In a patient-reported outcome measure, PEDS-QL MFS, or multifunctional fatigue scale, which quantifies fatigue, and in Trailhead, we are using a version that has been adapted for use in adults. Reports directly from people living with DMD are important because they directly capture how they are experiencing day-to-day life, not just what we observe in the clinic. From CL101 baseline to day 140 of trial head, the mean TQL MFS score increased by 6.94 points from 71.53 to 78.47. Again, this is an encouraging complement to the data we've already walked through because it suggests that the biologic changes we are observing may be translating into something adults with DMD can actually feel, specifically less fatigue and an improved sense of quality of life. Taken together with everything else that we covered in this presentation, this reinforces the consistency of the signal we're seeing across multiple objective and independent measures. Turning to slide 12, we are fortunate to have real-world validation from a leading voice in the DMD field, Dr. Perry Shea, professor of neurology and pediatrics at the David Geffen School of Medicine at UCLA, who has spent his career treating and studying patients with Duchenne, including adults, a population that is especially difficult to impact given the significant muscle and stem cell loss. I encourage everyone on the call to review Dr. Hsieh's full comment in this morning's press release. Drawing on his extensive experience with both adult and pediatric neuromuscular patients, he views the consistency across strength, muscle composition, effort, quality of life, and safety as highly encouraging despite the small cohort size. He also believes the improvement in fat fraction and total effort may be clinically meaningful, particularly in a population where continued decline, not stability or improvement is the expected course. Coming from a clinician who treats these patients every day, this perspective reinforces our confidence in advancing SAT 3247 in both Trailhead and Basecamp. Turning finally to slide 13 and where we go from here. As Frank noted in our press release this morning, we believe these six-month findings continue to demonstrate the potential of SAT-3247 in all people living with DMD, and in particular in Base Camp, our study in a pediatric population with DMD. Because boys with DMD typically have more muscle mass relative to adults, Base Camp may present an even greater opportunity to demonstrate the clinical potential of SAT-3247 in a clinical trial population. In terms of near-term catalysts, we remain on track to complete Basecamp enrollment in the third quarter of this year, as well as initiate U.S. clinical trial sites for Trailhead. Looking ahead to the fourth quarter, we expect two important readouts, initial top-line data from Basecamp, which we view as a key pediatric proof-of-concept study, and a significant value inflection point for the company, and the 12-month primary readout from Trailhead among these first four participants, which will also inform our thinking on potential engagement with the FDA on a path forward with STAT-3247. So to summarize, we believe today's data further demonstrate biologic activity and encouraging clinical data reinforce a differentiated dystrophin-independent mechanism of action for SAT 3247 with a clear and near-term catalyst path ahead. Finally, I want to thank all of the team members at Sotelos who are working hard and tirelessly every day to conduct these high-quality clinical trials. And I want to thank the DMD community for partnering with us on this journey. With that, I am happy to answer questions. I do need to leave shortly after 9 a.m. Eastern to give our presentation of this data at ICM&D. With that, I will turn the call back over to the operator for questions. Operator?

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you each keep to one question. Our first question comes from the line of Joseph Schwartz with Lee Rink Partners. Please proceed with your question.

Great. Thanks. And congrats on all the progress. I wanted to ask about the potential read-through from trailhead to base camp. Have you done any more response exposure analyses? And are the two patients, I think there were one in three, who had the greatest improvement in MRI fat fraction, the same two who had the greatest improvement in TEC99C? Thanks.

Thanks, Joe, for the question. So we do believe that the data that we're seeing in Trailhead gives us confidence about what we will be able to see in Basecamp. We've not performed any additional correlation analyses looking at drug concentration and level of effect in Trailhead. We do have the opportunity to do analyses like that within Basecamp. As you'll recall, we previously showed that in the CL101 study, the participants who had higher drug concentrations were the participants who had a greater improvement in their hand grip strength. And so, in Basecamp, we're evaluating both the 60 milligram and 120 milligram dose levels. As far as your question about the two participants who had the greater improvement in muscle MRI, fat fraction, and then the TE99C, so the participants who had the greatest improvement in muscle MRI, one of those participants was a participant with low baseline creatinine. One of the participants was a participant with high baseline creatinine. As far as the TE99C, the two participants who had a higher level of function at baseline, both of those participants had higher baseline creatinine, and those participants actually went on to have a greater improvement in their TE99C. To me, this is all very encouraging and consistent with what I believe is the biology of both FAT3247 and the disease itself. Again, we know that in patients living with Duchenne, there is a progressive loss of muscle over time, and this muscle is replaced by fat. And so what we see is that the participants with the lowest muscle mass as measured by, based on creatinine, they are more likely to have a higher fat fraction. The participants with more muscle mass are more likely to have greater function and are actually able to gain more function over the period of time of this trial. So we believe it's all consistent with both the biology of the disease and how the drug is working.

Very helpful. Thank you.

Thank you. Our next question comes from the line of Kostos-Bilinors with Oppenheimer & Co. Please proceed with your question.

Thanks for taking our question and congrats on the very promising data. Given that the MRI muscle fat fraction data are very promising here, very telling, can you elaborate a little bit on these endpoints? For example, whether it could be an approvable endpoint with a potential accelerated approval and whether you would consider making it a co-primary or even a primary endpoint for your readout at the end of the year, given that you have a meeting with the FDA coming Any caller around this endpoint would be helpful. Congrats again.

Thank you, Kostas. And we are very encouraged by the muscle MRI data. We do believe this is an endpoint that has been very well characterized within the natural history studies. In base camp, we will be evaluating fat fraction within the vastus lateralis muscle in the leg. In trailhead, we are evaluating fat fraction within the biceps brachii muscle within the arm. Both muscles have been associated with function such that when fat fraction increases in the vastus lateralis, it is known that patients living with DMD are more likely to lose ambulation. They're more likely to lose function. When fat fraction increases in the bicep, it's known that patients with DMD are more likely to lose hand-to-mouth function. They're more likely to lose function at the shoulder. And so this natural history has been gathered over a long period of time. And in fact, it's part of the reason that other sponsors have actually evaluated muscle MRI in their clinical trials. And we know the regulatory agencies are familiar with this endpoint. We know that they're familiar with this natural history. In fact, in the guidance document for Duchenne, the FDA describes fat fraction as an endpoint. And so we will be continuing to evaluate fat fraction in Trailhead. It is one of our endpoints within Basecamp. We have always said that we believe the data from Trailhead may give us the opportunity to speak with regulators about a path forward in Basecamp around accelerated approval if the data supports that. And so we will be considering our options on when to engage with the FDA around this and other data from these programs.

Thank you. Our next question comes in the line of Andy Garcelli with Guggenheim Partners. Please proceed with your question.

Hello, guys. Thank you for taking my question. Just a quick question around MRI. Specifically, what's the kind of sensitivity of the assay and what's the variability around that?

Yeah, thanks for the question. So, you know, muscle MRI, this is a standard approach assessment using Dixon as the approach that is consistently used across the industry and across the natural history analyses. In this, several different slices were evaluated. This was an independent evaluation performed by a team who did not know the participant that they were evaluating. And the results that we're seeing are, at baseline, consistent with the natural history, with the population that would be expected. What is inconsistent, different from the natural history, is the change that we see over five months of dosing. And so, you know, we believe this is very encouraging, very supportive of the biologic activity, and so we will be continuing to evaluate this in Trailhead and then look forward to evaluating the muscle MRI findings within Basecamp.

Thank you. Looking forward to it.

Thank you. Our next question comes in the line of Yanni Sorcides with Cantor Fitzgerald. Please proceed with your question.

Hi, good morning. This is Imogen Anfitiani. Thanks for taking my question, and congrats on the update. Two questions from me. One is, what would you point people to focus on most in Basecamp? And then, will you be pooling the dosing cohorts for running stats, or be seeing those separately?

Yeah, thanks for the question.

So, So, at Base Camp, we have always believed that this is a population that has a greater opportunity to demonstrate benefit within the short period of time of a clinical trial. And this is because in order for SAT-3247 to work, there needs to be muscle present. That muscle must want to have regeneration. there must be a signal to activate the satellite cells. And then 3247 is able to influence the polarity of those stem cells to increase asymmetric division and increase muscle progenitor cell development. And so in a young population with Duchenne, we know they have more muscle. We know that they have less fibrosis, and we believe this can translate then into an increased opportunity within a short period of time to show benefit. We have a number of endpoints that we're excited about within Basecamp. Right now it's set up to have dynamometry be the primary endpoint. We also have muscle biopsy so we'll be able to see biologic activity within the muscle itself. We have the muscle MRI. We also have SB95C, which is a similar assessment to the TE99C that's collected within Trailhead, as well as NSAA and other more traditional functional assessments and PROs. So, we believe it provides a very comprehensive evaluation of the potential for function in a younger DMD population. So we believe that overall Basecamp gives us the opportunity to have a data set that could support accelerated approval once we have discussions with the FDA and see how the data turn out.

Thank you so much.

Thank you. Our final question comes from the line of our service with H.C. Wainwright. Please proceed with your question.

Hey, guys. Good morning. Congrats on the positive data. It's very impressive. Just one quick question on the T99C. Do you guys have the data for the three-month measurements for the T99C? And also, what's your thoughts on using this endpoint for a regulatory, like for the approval endpoint when you're talking to the agency for the non-abitory patient.

Thank you. Thanks for the question, Arthur. So, we don't have TE99C at three months in Trailhead for these first four participants. So, the first assessment in Trailhead for these first for participants is the six-month assessment. As far as potentially utilizing TE99C as an approvable endpoint with the regulatory agency, TE99C has not been evaluated as often in the natural history, as has SV95C. CISNAV is beginning to do more work with that. If you go to the CISNAV website, you can see posters where they have evaluated correlation between TE99C and the BROOKS score, which is an evaluation of upper limb function, and they see correlation there. We do believe that there is ongoing work with SV95C in the younger ambulant population, and that is an endpoint that regulators are becoming increasingly familiar with. This is an endpoint that Europe has agreed can be a primary endpoint in Duchenne, And so, the encouraging data that we see with TE99C and the adults, we believe, gives us confidence about potentially seeing benefit with SB95C. I will also say that right now, we believe that the dystrophinopathy population is one population. And so we would not be looking for a separate approval in one portion of the population. Rather, we would be looking to have conversations with the agency about approval across the entire population once we see data from the completed base camp study and continue to see data from Trailhead over the next six months with the 12 months readout later this year.

That's very helpful. Thanks.

Thank you. Ladies and gentlemen, we've come to the end of our time allowed for question and answer. I'll turn the floor back to Mr. Gleason for any final comments.

Thank you, operator. And once again, thank you to the audience. We very much appreciate your interest in Sotelos. I'll repeat again how excited we are by the data that we're seeing which is a continuation in albeit a small number of adults for patients but to see such consistency across not just the patients but a variety of measurements increases our confidence in our drug and in the plans we have going forward. And to remind everyone, we're fully cashed up to be able to execute on our plans over the next couple of years through to the end of 2027. And we are increasing our engagement with the FDA as a direct result of the data that we're generating. So we're filled with a lot of optimism and I'm very proud of my team and where we've gotten to with our program. So I'll turn it back to you, Dan, and thanks again for listening in.

Thank you. This concludes the new conference. You may disconnect your lines at this time. Thank you for your participation.